Permits Here....Get Your Permits Here...Get 'em While They're Cheap

PA DEP Gets Approval to Raise Marcellus Permit Application Fees

Pennsylvania's Environmental Quality Board today approved a Department of Environmental Protection request to impose new fees for Marcellus Shale drilling permits that will replace the $100 flat fee with a variable fee structure based on well depth. Though fees have not increased in the state since 1984, the new structure will result in a cost of $900 for a 1500' deep Marcellus Shale well plus $100.00 for each 500' of total depth. Applying for a typical Marcellus well permit with a total depth of 10,000' will cost $2,600 by the early Spring of 2009.

Full Story

Representative DeWeese Encourages DEP

Drop the Sledge and Hire More Staff

In a letter to acting Secretary of Environmental Protection John Hanger, Representative & Majority Whip, Bill DeWeese, Greene, Fayette & Washington counties, encouraged Hanger to rescind any blanket decree afflicting scientifically sound operators in the Marcellus Shale. He is, of course, referring to the DEP order banning the treatment of frac water in the Monongahela River Basin by municipal treatment plants. This decree, designed to reduce the TDS (total dissolved solids) in the river has resulted in a range of consequences from a total shut down of fraccing operations to the addition of significant costs to transport frac flowback to one of the few available treatment plants in the state. According to DeWeese, the decree makes no distinction between those operators and those of a lesser quality who might have inadequate or few pollution controls in place.

He also suggested that the agency expedite the permitting process so the natural gas industry doesn’t gravitate outside of the borders of the Commonwealth.

Press Release

SRBC Announces Streamlined Permitting Process for Consumptive Water Use

The Susquehanna River Basin Commission announced today that the permitting process for consumptive use of water from the basin has been streamlined. Among the streamlining provisions in the amended regulations, all requests for consumptive water use by the national gas industry will now be handled through SRBC’s simplified approval-by-rule process (commonly known as a general permit). To make this change possible, SRBC likewise expanded the sources of water that applicants can consider for their consumptive water use, including public water supplies, discharges from wastewater treatment facilities and other reclaimed waters, and withdrawals from other sources approved separately by SRBC.

Other key changes in SRBC’s regulations include:
- Regulating projects on a drilling-pad basis.
- Requiring project sponsors to certify compliance with state and/or federal laws for the treatment and disposal of flowback fluids or produced brines.
- Incorporating the August 14, 2008 determination by the SRBC Executive Director (which went into effect on October 15, 2008) that all quantities of water withdrawn or used for natural gas well development be reviewed.
- Limiting SRBC’s approval to five years versus the standard approval of 15 years for other types of projects.

The regulatory amendments will go into effect January 1, 2009, or when they have been published as final in appropriate federal and state registers, whichever comes later.

Press Release

PA Senate Hears Drilling Complaints

A hearing last evening at Misericordia University was called by the Senate Majority Policy Committee to explore the economic and environmental impact of drilling in the Marcellus. The most common theme throughout the evening was the time-consuming and lengthy permitting process and cumbersome regulations making it difficult for them to operate in Pennsylvania.

"I have great hopes for what the Marcellus shale play might still hold for Pennsylvania. Unfortunately, my experience to date does not lead me to be very optimistic," Wendy Straatman, president of Exco-North Coast Energy Inc...........DEP permitting delays that are "unlike anything we have seen in any other state in which we operate."

Scott Rotruck of Oklahoma City-based Chesapeake Energy Corp., predicted "ominous" consequences for Marcellus development if Pennsylvania's regulatory environment doesn't become more welcoming.

The state needs to be "careful we are not killing the goose that's laying the golden egg," said Sen. Mary Jo White, R-Venango.

"There has to be a smart way to protect what we need to protect, and at the same time (prevent) a delay that really serves no purpose," said DEP Secretary, John Hanger. "I believe there's a learning curve here for everyone involved."

Industry executives also opposed a tax on natural gas that the administration of Gov. Ed Rendell has said it is considering. "New taxes will stymie Marcellus development," said Ray Walker Jr., vice president of Range Resources Corp

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California Chokes on Alternative Fuels Proposition

California rejected Proposition 10 by a wide margin in yesterday's voting as 60% of the state's 9.5 million voters said no. The Alternative Fuel Vehicles And Renewable Energy Bonds Initiative Statute was strongly supported by T. Boone Pickens and Aubrey McClendon to promote natural gas as an important alternative for transportation fuel in the state.

The measure was strongly opposed by the Sierra Club, League of Women Voters, California Nurses Association, California Federation of Teachers, Consumer Federation of California, Consumer Watchdog, the Utility Reform Network, and California Labor Federation, AFL-CIO.

Description of Bill

PA DEP Shoots SWPA Drillers First, Asks Questions Later

The Pennsylvania Department of Environmental Protection is investigating the source of unusually high levels of total dissolved solids, or TDS, detected at points along approximately 70 stream miles on the Monongahela River beginning at the West Virginia border to the confluence with the Youghigheny River. Test results indicate levels of up to 852 milligrams per liter which exceed the allowable 500mg/l.

To immediately address elevated TDS levels, DEP is directing all sewage treatment plants accepting gas well drilling wastewater, and which discharge to the Monongahela River or its tributaries, to drastically reduce the volume of gas well drilling wastewater they accept to one percent of their daily flow. Currently gas well drilling wastewater constitutes up to 20 percent of those plants daily flow. The restrictions will reduce the volume of drilling wastewater treated by 90 to 95 percent. The restrictions will remain in place until the levels of TDS fall below the 500 milligram per liter standard.

Full Story

Marcellus Permits in PA Increase by 73 to 257 This Year

The PA DEP announced last week that 73 drilling permits for the Marcellus Shale were approved from August 15th to September 15th. They also released this very nice graphic of the county by county count of permits issued and wells drilled in the play.

View the full image

Read the press release

SRBC Proposing New Permitting Rules

The Susquehanna River Basin Commission (SRBC) today announced it is conducting public hearings on October 21 and 22 on proposed regulatory revisions that will further protect the basin’s water resources and streamline the review of consumptive water uses by the natural gas industry. SRBC’s proposed revisions are open for public comment through October 31.

Included among the proposed revisions affecting the natural gas industry, SRBC would:

- Require all requests for consumptive water use approval to go through SRBC’s approval by rule process – an administrative procedure – rather than SRBC’s standard consumptive water use application process.

- Expand the approval by rule process to allow project sponsors to utilize a broader range of water sources as part of their consumptive use approval, including public water supplies, discharges from wastewater treatment facilities and other lesser quality water sources, and withdrawals from other sources approved separately by SRBC. (The current approval by rule process applies only to water from public water suppliers, thus making project sponsors undergo the standard consumptive use application process for all other water sources.)

- Regulate projects on a drilling pad basis, versus the current process that addresses consumptive use requests on a company-lease area basis.

- Require projects to demonstrate compliance with state and/or federal law for the treatment and disposal of flowback or produced fluids, including brines.

- Incorporate the August 14, 2008 determination by the SRBC Executive Director that all quantities of water withdrawn or used for natural gas well development be reviewed effective October 15, 2008.

- Limit SRBC approval to five years.


Press Release at http://www.srbc.net/pubinfo/press/docs/ProjectReviewNaturalGasRulemaking_Sept2008_3_.pdf

All in All It's Just A

nother Brick in the Wall

The Susquehanna River Basin Commission announced today that effective October 15, all natural gas well development projects in the basin will require its prior approval regardless of the amount of water used.

Full Story at http://www.srbc.net/whatsnew/newsletters/article_10.asp

EXCO Resources to Begin Dallas-Harrisburg Nonstop Service Next Week

Never hoping to be entertained, I've listened to a lot of conference calls over many years but, yesterday afternoon, EXCO CEO, Doug Miller had me banging on my mouse pad during the Q & A. Now don't take the above headline too seriously but Doug did reply, "..I’d say this, permitting issues continue to be a problem. We’re working with them. I think we’re sending a whole crew of lawyers and Steve and everything up there" "I don’t know if that’s good or bad but they’re going up there to have some discussions." (Harrisburg, PA, to meet with various agencies to try to expedite the permitting process)

Or, I could have used a few other headlines like:

Aubrey Just Left the Building
Doug updated the leasing situation in the Marcellus and noted, "We've done some small acquisitions, mostly leasing. There’s quite a lot of acreage around up in Appalachia right now. I think Aubrey kind of left town and all of sudden, everything that was being held up just came flying in. I’d say we’re probably looking at pushing a million acres of potential up there. (Doug referring, of course, to Chesapeake CEO, Aubrey McClendon)

50 Texans Come a Knockin'
Describing the flood of applications being filed with the various permitting agencies in PA, Doug said, "They never had 50 Texans up there with 25 permits waiting in line. It’s a problem."

Slow and Slower
Doug, on the pace of development "Joe, I think slow is the underlying word.", "..we’re doing a lot of work and a lot of negotiatin' and a lot of schmoozing with both the EPA group and the water disposal people. It ain't an easy task. This is not East Texas/North Louisiana."
President, Steve Smith, "But it is doable, it’s just time consuming."
Doug, "It’s going to take some time and I’d say slow is the underlying theme."
Steve, "Drilling permits have been put on hold pretty much in Pennsylvania as I understand it. And again, it’s not anything sinister, it’s just – I think the body up there is just trying to get their arms around what’s going on. And so we’re – it's slow, they’re very slow coming through with the drilling and the water permits."

Take Me Home,....Country Roads
Doug, on giving some kind of idea of the production ramp up in the Marcellus, "I think what we’re doing right now with these first two (horizontals), those will be completed hopefully in September, October." "Pennsylvania is going to be slightly slower as we talked about. I think we’re moving the deep rig that we have down into West Virginia maybe after these two wells are drilled. It’s slightly easier to get permits, both water and drilling permits, so underline slow. And, I’m not going to give you any production rates right now because we’d love to have four or five rigs running in Pennsylvania the whole year. We do have some coming, but let's delay that."
Steve, "The permitting is actually a bit of a problem right now and that’s why we are drilling two horizontal Marcellus wells in West Virginia, that’s our next two wells will be – our next two Marcellus horizontals will be in West Virginia."

Okay, okay, maybe it's not a mouse pad banger for you but, it's hard out here bein' a blogger, especially a Marcellus blogger trying to find a little humor in the play. Thanks Doug. Can't wait till Q3!

Definitely worth a listen @ http://ir.excoresources.com/phoenix.zhtml?c=195412&p=irol-eventDetails&EventId=1904622

NYC DEP Wants Ban on Marcellus Drilling in Certain Areas

If New York City's Department of Environmental Protection gets its way, 500,000 acres in the city's watershed would be off limits to Marcellus development. The request includes banning drilling in a one mile perimeter around the city's Catskill reservoirs and all infrastructure. Other requests that will impede development throughout the watershed are:

-Development of a new working group to develop permit conditions comprised of members from the DEP, DEC, NYS Dept of Health, US EPA,and watershed and environmental groups.

-That the DEC consult the DEP when reviewing permit applications and incorporate DEP concerns into an enforceable DEC permit.

-Add another level of review allowing public review and comment to the DEC's well permitting environmental assessment form (EAF).

-Assurance that permits from the NYS Municipal Separate Storm Sewer System SPDES are required.

-Affirmation that natural gas exploration and extraction are subject to NYC Watershed Rules and Regulations.

Full Story at http://www.nysun.com/new-york/citys-drinking-water-feared-endangered-10b-cost/83288/
NYC DEP Letter at http://s3.amazonaws.com/propublica/assets/natural_gas/emily_lloyd_letter_080718.pdf
Watershed Map http://www.nyc.gov/html/dep/html/drinking_water/wsmaps_wide.shtml

Mr. McClendon Goes to Washington

Aubrey McClendon, Chairman & CEO of Chesapeake Energy, is making the rounds on Capitol Hill today armed with a new study showing that US natural gas reserves are 50% higher than recently thought and equate to 118 years (2,247 tcf) of supply. He follows T. Boone Pickens in a quest to make natural gas the primary fuel to lead us away from foreign sources of energy. He also appeared on CNBC this morning to discuss the findings.

According to McClendon, whose company helps funds the foundation, the new study is a real time analysis that includes current assessments of the major shale plays in the US. The study was done by Navigant Consulting.

Full Story at http://www.accountability-central.com/single-view-default/single-view-lexis-nexis/article/study-raises-estimates-of-us-natural-gas-reserves-could-be-50-bigger/?tx_ttnews%5BbackPid%5D=1&cHash=fd08742dd4
Video at http://www.cnbc.com/id/15840232?video=807915389

It's Not Easy Being Green

Scrambling for a seat at the Marcellus table, several environmental groups have asked New York Governor David Paterson for a moratorium on natural gas drilling until the environmental review that he promised has been completed. The signatories are the Catskill Mountainkeeper, Sierra Club Atlanta Chapter, Riverkeeper, Delaware Riverkeeper Network, Natural Resources Defense Council, Catskill Center for Conservation and Development, The Wilderness Society, and Catskill Citizens for Safe Energy.

Full Story at http://www.nytimes.com/2008/07/27/nyregion/27towns.html?ref=nyregion

Marcellus Developers Form Committee to Manage Water Resources

Most of the major players in the Marcellus have formed a consortium and organized the Appalachian Shale Water Conservation and Management Committee (ASWCMC). The mission of the group is to develop best water management practices and technical solutions for shale developments in the Appalachian Basin.

Full Story at http://www.businesswire.com/news/home/20080716006345/en

PA DEP's McGinty Clears Things Up for Cramer

In an interview on Jim Cramer's Mad Money last Friday, Kathleen McGinty, Secretary of the Pennsylvania Department of Environmental Protection discussed the stance of her department toward drilling activities in the Marcellus. I'd have to say it is level headed and upbeat.

Sorry I missed this one from last week but I've been away a bit lately.

Full Video at http://www.cnbc.com/id/25639023

Drillbits

Bob Away My Blues

I'm goin' down to the river...I got my cane pole in my hand
Got me some red worms...in a Maxwell House coffee can
I'm gonna sit under a shade tree...on the riverbank where it's cool
I'm gonna close my eyes and dream and let the cork bob away my blues

Toy Caldwell, Doug Gray and The Marshall Tucker Band created such a beautiful, peaceful scene with that tune but from there does it go...

Hey! What the hell happened to my river?

On June 6, in the wake of the May 30th DEP orders to Range Resources and Chief Oil & Gas to suspend a portion of their operations at separate sites in Lycoming County for violating Pennsylvania's Clean Streams Law, the Susquehanna River Basin Commission notified 23 natural gas operators currently using or planning to use the river's water to develop Marcellus wells that they now must have approval from the commission and follow water consumption guidelines. And, last Friday, the Pennsylvania Department of Environmental Protection held a Marcellus Shale Summit for Gas Operators in Harrisburg. This first of its kind meeting in Pennsylvania was certainly a novel and excellent idea but having to have that meeting at this stage of the game is really quite extraordinary.

Here we are with the majors having spent over $5 billion so far this year to gain a foothold in the play and they needed to go to a meeting with the DEP to get informed about water use! Is it really possible that the largest natural gas E&P companies in the US, after making billion dollar commitments didn't know that they had to get permits to pump frac water from the streams? Does this change the dynamics of the Marcellus' development? I think the answers are yes and yes.

From now on when you hear the word infrastructure you need to be thinking WATER. As evidenced by 5 year paid-up lease bonuses approaching $3,000 per acre and 20% royalties, the greatest drilling interest so far has been in the southern tier of New York and the northeastern part of Pennsylvania. This region, graced by the thickest deposits, shallowest depths and proximity to the northeast's large pipelines and gas markets, is by some accounts, also graced with something more precious; the northeast's finest, most pristine, wild trout streams. Now, we'll let you build a pipeline or two but, son, you foul up one of those trout streams and you in a heap o' trouble.

No doubt there were some interesting decisions made by many of the companies in the days following the May 30th orders to Range and Chief. Landowners have reported that Range immediately stopped acquiring leases in Luzerne, Lackawanna and Wyoming counties and Cabot Oil & Gas also stopped leasing in Lackawanna. It's not yet clear whether those moves had anything to do with the water situation. Maybe they've just gone fishin'.

Full Story at http://www.ahs.dep.state.pa.us/newsreleases/default.asp?ID=5107&varQueryType=Detail

Drillbits

Hey Boys, We Got Laws in These Parts

Following last weeks order to Range Resources and Chief Oil & Gas to suspend a portion of their operations at separate sites in Lycoming County for violating Pennsylvania's Clean Streams Law, the Department of Environmental Protection Secretary Kathleen A. McGinty thought it appropriate today to advise oil and gas industry officials that developing the natural gas resources found in the Marcellus Shale formation must be done in accordance with the state's environmental laws and regulations.

Full Story at http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/06-06-2008/0004827961&EDATE=

Whoa There Marcellus!

The Pennsylvania Department of Environmental Protection today ordered Range Resources and Chief Oil & Gas to suspend a portion of their operations at separate sites in Lycoming County for violating Pennsylvania's Clean Streams Law.

Full Story at http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/05-30-2008/0004823484&EDATE=

Drillbits

Shale We Dance?

In what appears to be the first positive government/industry collaboration in the Marcellus, the Lycoming County Board of Commissioners and the Williamsport/Lycoming Chamber of Commerce have formed the Community Gas Exploration Task Force. Unlike the PA state legislature which, so far, only views the profound impact of the shale play from a "let's tax the bastards!" perspective, Lycoming County's thoughtful, intelligent approach should be applauded.

Full Story at http://www.muncyluminary.com/News/articles.asp?articleID=7667